Selling Gold Scams
Investing in gold is popular at the moment, especially as economies around the world continue to suffer the consequences of the credit crunch and subsequent global recession in late 2007. Gold is typically used as a hedge investment when currencies are weakened by economic pressures, which is why so many savers of late have sought to transfer their liquid assets for gold bullion. The question is, how can ordinary people invest in gold whilst avoiding potentially ruinous scams?
Unfortunately, gold bullion is no stranger to crime. Fraud and theft have plagued the gold mining industry for centuries, bringing financial misery to those who simply made the wrong deals at the wrong time. Not all scams can be easily spotted, but it may be possible to avoid the more obvious by looking back through the years at some of the most damaging.
Examples of Scams
The trading of gold can be executed in various ways. People can buy gold bars and coins, invest in exchange traded funds (ETFs) or purchase shares in mining companies. One of the biggest and most damaging gold selling scams in history involved the purchase of gold mining shares.
In 1995, Bre-X Minerals Limited, a gold mining company from Canada, announced that it had found a truly huge reserve of gold in Busang, Indonesia. The hitherto small-scale firm had purchased the site in Borneo only two years earlier, but the apparent discovery of 70 million troy ounces of gold promised to change the company's fortunes.
Following the announcement of the gold find, shares in Bre-X Minerals Limited soared in value from virtually nothing to a peak of $286.50. In 1997, just two years after the mining company announced its massive discovery, questions were being asked about the authenticity of the find; indeed, Bre-X Minerals Limited was forced to go into administration that same year when it emerged that the samples of gold allegedly extracted from the Busang site had been faked. Horrified investors soon realised that the entire discovery was a sham. The Canadian firm was not sitting on a massive gold reserve. All investments had been for nothing.
Another type of gold fraud has seen mining firms exploited by unscrupulous firms and corrupt governments. Ghana, one of the few countries in the world that can boast significant stretches of unexplored territory, is regarded as one of the most promising in terms of gold exploration. Unfortunately, criminals operating in Ghana and other African nations often prey on unsuspecting firms and individual investors who wish to make a profit from this burgeoning sector of the market.
All That Glistens Is Not Gold
Of course, the most obvious type of gold scam is one that is not necessarily illegal (unless advertisements mislead buyers). Gold bullion is typically sold in bars or coins, providing fraudsters with the perfect opportunity to sell substandard 'bullion'. Some coins are merely covered in a very thin plate of gold, beyond which can be found a substantial quantity of aluminium, copper or some other non-precious metal. If gold-plated coins or bars are sold for the same price (by weight) as solid gold bullion, investors have been conned out of their money.
In summary, gold coin scams exist in various forms, from the faking of gold reserves to induce stock market movements to the selling of inferior alloys. Any person who chooses to invest in gold must make an effort to identify the best opportunities from the most reliable traders, remembering all the while that not everyone is genuine.
